No “Most Favored Nations” on the Continent

First, Reuters reports that Amazon has reached an agreement with the European Commission to drop the “most favored nation” clause in its publisher contracts. Such clauses required publishers to give Amazon at least as good a deal as it gave any other outlet—meaning that if Amazon noticed a better price on a competitor’s web site, they would lower theirs to match.

Amazon has committed to leaving the “most favored nation” clause out of contracts with European publishers for the next five years. The story concludes that the European Commission is still investigating Amazon’s use of Luxembourg as its European headquarters to minimize its tax bill.

Draining the Ebook VAT

On a related note, the Irish Times reports that the European Parliament Economic and Monetary Affairs Committee has voted 48 to one, with two abstentions, to approve a proposal that would allow member states to lower the Value-Added Tax (roughly equivalent to the US’s “sales tax”) rate they charge on ebooks.

Under current regulations, EU member states must charge a 15% VAT rate on ebooks, whereas for printed publications they may charge between zero and 5%. The new proposal would extend the printed publication VAT rate to ebooks as well. Before going into effect, the proposal must first be ratified by the EU Parliament as a whole, later this month.

If this new law goes through, it will certainly be overdue. Ebook sellers and customers alike have been complaining for years of the unrealistically high VAT rates ebook stores had been forced to charge. This will have the effect of considerably lowering ebooks’ effective prices in Europe once it takes effect.

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Published by Chris Meadows

TeleRead Editor and Senior Writer Chris Meadows has been writing for TeleRead--except for a brief interruption--since 2006. Son of two librarians, he has worked on a third-party help line for Best Buy and holds degrees in computer science and communications. He clearly personifies TeleRead's motto: "For geeks who love books--and book-lovers who love gadgets." Chris lives in Indianapolis and is active in the gamer community.
View all posts by Chris Meadows

Reducing the VAT rate for ebooks would be good news for us independent authors. We could either lower prices, or we would make more in royalties. I know my UK revenues have gone down considerably since the higher VAT was imposed a while back.

Ah yes, but this VAT-On, VAT-Off business leaves me feeling like I’m on some amusement park ride. My head is spinning.

The real problem lies with the VATs themselves. They’re not only a hidden tax, often with laws that prohibit retailers from revealing how much of an item’s cost is a VAT, they force sellers to adjust retail prices up or down every time the VAT changes. The American sales tax, added on at the time of sale, makes more sense.

That is it makes more sense to everyone but governments, who’re grabbing as much as 25% of the price of everything that people buy. That’s one reason why the average European in every country but bank-rich and tax-sheltered Luxembourg, has a lower standard of living than the average citizen in every U.S. state, even the poorest.

It is perfectly legal to show the VAT exclusive price and a B2B site can show that price only BUT a B2C site or store must show the inclusive price and cannot show the lower, exclusive, price more prominently .

Like ‘small print’, advertisers are always very innocent when caught.

Amazon email you an invoice that shows the VAT paid and the till roll at most supermarkets (I have an Aldi example here) will do the same.